Halftime: Beware The Bear

Constance Parten

Thursday, 20 May 2010 | 2:02 PM ETCNBC.com

SHARES

With the S&P entering correction territory, and the Dow down sharply on the day, what's the best move for your money now?

FLIGHT TO LIQUIDITYSteve Grasso said the major players are moving heavily into cash.Traders who had gainers are selling them to liquidate. There's no such thing as a bad sale. A hedge fund manager just told me that, and that's the truth.

Is there anything to buy?

Patty Edwards said she's been making a shopping list for quite some time. She thought she'd buy Apple at $250 but is "not feeling the love. I think it could go to $225."

Fast Money Halftime Report

The Fast Money traders weigh in on the midday trades.

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OPTIONS EXPIRATION AND VOLATILITYOptions expiration was responsible for the volatility spike earlier this week as institutional players were setting themselves up and rolling into June expirations, Jon Najarian said, thereby extending their protection.

"Most of the big players have protection on right now. A lot of the folks I talk to have gone to cash or as close to it as they can."

Major players are no longer waiting until the end of the week to wrap up their options positions, Grasso said. They're ahead of the curve. It's primarily the retail investor now.

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PLAYING VOLATILITYWith the VXX up sharply this week, Gary Kaminsky said he continues to believe that this is the movement of the market. Risk is coming out. I continue to believe that this is the beginning of the problems (in Europe) not the end.

So how can you play the VXX now? If you want to speculate on the increased volatility, stay naked long volatility, Kaminsky said. If you own equities, if you own stocks...you must protect yourself in the options market, either with puts or being long volatility. You must buy protection.

Najarian added that investors should buy protection as a spread. This is a very dangerous time to be buying protection, he said.

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SIGNIFICANT FOREX LEVELSYen strength across most currencies reminds Brian Kelly of Kanundrum Capital of what happened in the foreigh exchange two weeks ago when there were massive moves of 2 and 3 percent. This is just a global derisking, he said.

Levels to watch this afternoon:A break of 72.50 on the AUD/YEN means investors should watch out for the equity market, Kelly said. 89 on USD/YEN. If we break that, that's another key level for today and into this afternoon.

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FLASH CRASH LOW TO BE TESTEDEven as regulators continue examining the activities of large traders and are reviewing the role of electronic trading platforms, Kelly said he believes the 'Flash Crash' low of 1065 will be tested soon.

"I think that's going to act as a magnet and we're probably going to break through it. I think we go through that May 6 low."

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WORRISOME TECHNICALSTechnology bellwethers are all down significantly, including Google , Oracle , Cisco and Microsoft . From a technical standpoint, there seems to be a breakdown going on. Kaminsky said fully invested, long-holding managers are feeling the need to move into cash and selling the most liquid, large names.

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CRUDE GETTING PUMMELLEDOil fell below $68 a barrel on Thursday to its lowest in nearly eight months, under pressure from concern that the euro zone debt crisis will cut both risk appetite and demand for oil. There's no reason someone would be selling crude into 65 unless they're moving into cash, Najarian said.

Kaminsky said it's most important to be a realist. "You have to be concerned."

Joe Terranova said no one wants crude right now and people are pulling out of the futures.

This is expiration driven and this could get real ugly on a headline level, he added.

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CALL THE CLOSEEdwards: If you don't have the VIX... you sit back and watch and pop some popcorn.Grasso: Getting long this market is like playing leapfrog with a unicorn. Where's the upside? Sold.Kominski: Sometimes losing money is worse than missing the opportunity to make it.Najarian: If the programs do gag again, and Mary Shapiro and the regulators that should've been telling us what was wrong with this -- If they can't come out and tell us what was wrong investors won't feel like coming back in for quite a while.

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